UPDATE 5-Apple, Foxconn improve China plants, but more to do -audit

* Hours must be cut, some workers worry about overtime

* Report comes day after Apple sets new market value record

* Foxconn says to cut overtime further

By Clare Jim and Poornima Gupta

TAIPEI/SAN FRANCISCO, Aug 22 Apple Inc
and Foxconn have improved working conditions at Chinese
factories that make most of the world's iPads and iPhones,
according to auditors the firms enlisted to monitor the process,
but tough tasks lie ahead.

The Fair Labor Association said on Tuesday local laws
require the companies -- which came under fire over conditions
at the plants blamed for a series of suicides in 2010 -- to
reduce hours by almost a third by 2013 for the hundreds of
thousands working in Foxconn plants across southern China.

Foxconn said on Wednesday it would continue to cut overtime
to less than nine hours a week from the current 20, even though
that could raise labor costs while also making it difficult to
attract workers.

"It is a challenge. When we reduce overtime it means we need
to hire more people and implement more automation, more
investment on robotic engineering. More workers also mean more
dormitories and recreational facilities; it takes time," said
Louis Woo, special assistant to the CEO of Foxconn.

"But I expect more loyalty from workers as a result, and
then we can save more costs on recruitment and retainment," he
told Reuters in an interview on Wednesday.

"Yield rates will also improve. Efficiency in terms of
productivity, yield gain, retention and lower turnover rates
should be able to improve next year."

Earlier this year, the FLA -- of which Apple is a member --
found multiple violations of labor law, including extreme hours,
after launching one of the largest investigations ever conducted
of an American company's operations outside the United States.

Woo said Foxconn not only wants to do "the right thing" for
its one million employees, it also wants to serve as a model for
other companies.

In a report tracking the progress of those commitments, the
FLA said it had verified that agreed-upon changes had been
instituted and that Apple was trying to hold its partner, the
world's largest contract manufacturer, accountable.

Auret van Heerden, president and CEO of the FLA, said
Foxconn faces a challenge from workers' expectations.

"A lot of workers have clearly come to Shenzhen to make as
much money as they can in as short a period as they can, and
overtime hours are very important in that calculation," he said.

"We are picking up concerns now on the microblogs about
what's likely to happen as hours gets changed, and whether their
incomes will be shaved as well."

Many people would leave Foxconn if there is no overtime,
according to a post by "Shenzhen Mars" on China's Twitter-like
Weibo.com message system.

Foxconn's Woo said the company has been constantly telling
workers about the importance of the quality of life and health.

"This is the thing we need to continue to communicate with
workers, especially young migrant workers, that anyone who works
more than a certain number of hours will feel tired and not
well. If we can improve the work environment and benefits, they
can enjoy their life better."

At Foxconn's massive factory in Shenzhen's Longhua district,
six workers interviewed by Reuters said overtime hours had been
cut to between 48 to 60 hours per month, down from some 80
before.

Some said more workers were quitting Foxconn to seek better
paid work elsewhere, with red posters plastered on walls
everywhere calling for large-scale recruitment of replacements.
Staff were getting text messages offering bonuses for referring
friends or relatives to the factory.

"A lot of my friends have resigned," said a production line
worker surnamed Li. "...From just my home town alone, there have
been at least ten people who have left. On a basic level, most
workers were able to withstand (the pressures) of the previous
overtime system."

But not everyone was unhappy.

"There's been an improvement in the past six months... It's
a bit more comfortable with shorter work days," said
spiky-haired worker Liu Xiaoguan. But his take-home pay has
dropped from around 3,700 yuan ($583) per month to 3,000 yuan.

"I hardly save anything," he said with a laugh. "I like
spending too much."

PROTESTS

Global protests against Apple swelled after reports spread
in 2010 about the suicides at Foxconn plants, blamed on harsh
working conditions and alienation felt by migrant laborers,
often from impoverished provinces, in a bustling metropolis like
Shenzhen, which is home to two of the three factories the FLA
inspected.

Apple has tried to counter criticism that its profits are
built on the backs of mistreated Chinese workers. The FLA's
progress report comes a day after Apple's market value climbed
past $623 billion, surpassing the record set by Microsoft Corp
during the heyday of technology stocks in 1999.

The latest report card on Apple-Foxconn comes after first
findings and a timeline for improvements were announced in
March, though some industry observers said the original
agreement was not entirely independent because of close ties
between the FLA and corporate members.

Since that March audit, rights groups including China Labor
Watch have conducted their own studies.

The group said in a statement on Wednesday that Foxconn
workers were still unhappy and urged other Apple suppliers to be
scrutinized as well.

"Workers have to complete the workload of 66 hours before
within 60 hours now per week. As a result, the workers get lower
wages but have to work much harder and they are not satisfied
with the current situation," it said.

Apart from health and safety enhancements, Foxconn is
offering up a few enhancements to employee morale. For instance,
Van Heerden said it is increasingly giving workers a choice of
accommodation, such as by providing an allowance for housing and
food if the workers choose to live off-site.

Foreign companies have long grappled with working conditions
in China, dubbed the world's factory because of its low wages
and efficient coastal transport and shipping infrastructure. In
the 1990s, investigations targeted shoe and apparel maker Nike
Inc, which eventually agreed to institute changes.

FRANKFURT, Dec 9 Labour unions have secured
guarantees for a planned merger of Linde and U.S.
rival Praxair, saying on Friday there would be no forced
layoffs at Linde in Germany until Dec. 31, 2021 in case of a
tie-up.

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